Core Viewpoint - Hong Kong property prices are experiencing a recovery, with strong sales of some new developments and optimistic market sentiment driving developers' stock prices up since the beginning of the year [1] Group 1: Market Trends - The upward trend in property prices is expected to continue, although the pace of increase is anticipated to be more moderate due to cooling interest rate cut expectations and resilient mortgage rates in Hong Kong [1] - Historical data suggests that when property price growth slows or market sentiment peaks, real estate stock prices often experience a correction [1] Group 2: Forecast and Recommendations - The company maintains a forecast of a 5% increase in Hong Kong property prices for 2026 [1] - Preferred stocks include Hysan Development and Link REIT, both rated as "outperform" [1]

Economic Outlook - Citigroup's economist for Greater China, Ray Chien, anticipates a faster recovery in Hong Kong's economic activity next year, although the growth rate will slightly slow down due to a higher base effect. The GDP growth forecast for the first half of next year is 2.2%, accelerating to 2.9% in the second half, resulting in an annual growth of 2.5% [1] Housing Market - Citigroup expects that the Federal Reserve's further interest rate cuts next year will help keep the Hong Kong Interbank Offered Rate (HIBOR) at low levels, supporting a 3% increase in residential property prices in Hong Kong next year. However, commercial properties will continue to face pressure [1] Stock Market Predictions - The forecast for the Hang Seng Index is to reach 27,500 points by mid-next year, with a potential rise to 28,800 points by the end of the year [1] Risk Factors - Two major risk factors identified include ongoing geopolitical uncertainties and the accelerated integration between Hong Kong and mainland China, which implies increased industry competition. Small and medium-sized enterprises, as well as the food and beverage sector, are expected to face significant operational and profit pressures [1]